Termination settlement proposals have always had a low threshold for audit. It currently sits at $100,000 meaning that contracting officers are required by regulation to request an audit of any termination settlement proposal that exceeds $100,000. That is about to change.
Defense contractors sometimes consolidate and then restructure to reduce operating costs. Reducing operating costs will then reduce contract costs. At least that’s the theory. Back in 1994, Legislation was passed whereby the Defense Department would pick up some of the increased costs so long as contractors could demonstrate either (i) a 2:1 return on investment or (2) that the return would exceed the cost and the business combination would result in the preservation of critical capability that might otherwise be lost to the Defense Department. DoD formulated procurement regulations to go along with the legislation. Those regulations can be found in the DoD FAR Supplement at 231.205-70, External Restructuring Costs.
Source: PNWC’s Government Contracting Update: External Restructuring Costs